For decades, the competitive advantage of the global textile and garment industry was primarily built on a cost-optimization model: large-scale production, low inventory levels, and order allocation to countries with competitive labor costs. This model operated effectively in an environment of open trade, stable logistics, and predictable demand. However, the post Covid-19 business environment has shown that these foundational conditions are changing. Global economic growth has slowed, merchandise trade has weakened, geopolitical instability has intensified, and requirements related to compliance and supply-chain traceability have become increasingly complex. Under these conditions, cost optimization alone is no longer sufficient to sustain competitive advantage. Enterprises are being forced to adopt a new approach: optimizing efficiency across the entire supply chain, where cost, speed, reliability, and resilience must all be balanced.
Macroeconomic Context: Uncertainty as the New Baseline Condition
Since the Covid-19 pandemic, the global economy has entered a period of greater instability. The pandemic disrupted supply chains; the Russia–Ukraine conflict drove up energy and logistics costs; and strategic competition among major economies accelerated protectionism and the restructuring of global trade flows. By the 2025–2026 period, tensions in the Middle East further demonstrated that geopolitical instability is no longer a short-term risk, but has become a persistent feature of the global business environment.
Macroeconomic forecasts clearly reflect this trend. According to the International Monetary Fund (IMF), global economic growth in 2026 is projected at around 3.1%, significantly lower than the 3.7% average recorded during 2000–2019. The IMF also warns that under a scenario of prolonged high energy prices, global growth in 2026 could fall to 2.5%; in a more severe scenario, growth could decline to around 2%, while global inflation may exceed 6% by 2027. Regarding global merchandise trade, the World Trade Organization (WTO) forecasts global goods trade growth of only around 1.9% in 2026, sharply down from 4.6% in 2025. If oil prices remain elevated, that figure could decline further to 1.4%.
For the textile and garment industry, which is highly sensitive to market fluctuations — the slowdown in global trade has led to clear changes in ordering behavior: smaller orders, more fragmented sourcing, shorter production cycles, and greater volatility. As a result, textile and garment supply chains are now facing dual pressure: weak demand is forcing buyers to require lower prices and greater order flexibility, while at the same time input costs, logistics expenses, compliance requirements, and operational risks continue to rise. This is fundamentally reshaping how enterprises organize and manage their supply chains.
The Limitations of the “Lean” Supply Chain Model
For decades, global textile and garment supply chains have been organized around the lean model, aiming to minimize inventory, optimize capacity utilization, capitalize on labor cost differentials, and operate through stable flows of goods. In an environment characterized by open trade, low-cost logistics, and relatively predictable demand, this model generated substantial efficiency gains.
However, the lean model is built upon several fundamental assumptions. First, supply can be mobilized exactly when needed. Second, logistics systems remain stable and low-cost. Third, trade policies experience minimal disruption. Fourth, market demand can be forecast with sufficient accuracy to manage inventory effectively. Once these assumptions are disrupted, the advantages of the lean model can quickly turn into vulnerabilities.
In the textile and garment industry, maintaining low inventory levels helps reduce financing costs, but it also weakens the buffer capacity when supply chains are disrupted. Concentrating production in a limited number of countries may optimize economies of scale, yet it simultaneously increases dependency risks. Sourcing production far from consumer markets can lower manufacturing costs, but it also extends lead times and reduces responsiveness when demand shifts. When logistics costs, tariffs, or exchange rates fluctuate, the efficiency gains achieved through initial cost savings can be completely erased.
This highlights the weakness of localized optimization thinking. A sourcing decision may appear cheaper when evaluated solely on Free on Board (FOB) price, but it may not be the most efficient option once total costs are taken into account — including logistics, inventory, delivery delays, compliance requirements, and opportunity costs. In stable environments, these costs are often underestimated; however, under conditions of uncertainty, they become decisive factors.
Therefore, the issue is not to abandon the lean model, but to place it within a new management framework. Supply chains still need to remain lean, but not to the extent that they lose resilience. Cost efficiency remains important, yet it must be balanced with reliability, speed, and adaptability.
From “Lean” to “Resilient”: The Essence of the Transition
The concept of a “resilient supply chain” does not mean that enterprises passively accept higher costs; rather, it represents an approach to optimization under conditions of risk and uncertainty. While the lean model asks: “How can production be carried out at the lowest possible cost under normal conditions?”, the resilient model asks, “How can efficiency be maintained when conditions change?”
This difference leads to fundamental changes in system design. Instead of relying on a single optimal sourcing solution, enterprises build diversified supplier portfolios with alternative options. Instead of minimizing inventory to the lowest possible level, companies establish strategic inventory buffers for materials or products exposed to higher risks. Rather than evaluating suppliers solely on price, enterprises also incorporate criteria such as delivery capability, transparency, compliance, and the ability to recover from disruptions.
In the textile and garment industry, resilience is closely tied to speed. Because product life cycles are short and demand changes rapidly, enterprises with shorter lead times not only reduce inventory risks but are also better positioned to capture market signals. As a result, many brands combine offshore production in low-cost manufacturing hubs with near-market production for fashion-sensitive product lines, short-life-cycle items, or products with difficult-to-forecast demand.
The core principle of a resilient supply chain is not to build a more expensive system, but to build a system with more options. In a high-risk environment, enterprises with greater flexibility and alternative choices gain a competitive advantage. In contrast, companies that rely on a single supplier, a single transport route, a single customer group, or a single production model are far more vulnerable to disruption.
Restructuring Supply Sources: From “China + 1” to a Multi-Node Supply Network
The shift in supply chain thinking is most clearly reflected in sourcing strategies. Previously, the “China + 1” approach primarily meant reducing dependence on China by adding one additional manufacturing country. Today, however, this trend has evolved into a “China + multiple destinations” model, featuring a more geographically diversified supplier network in which each country plays a different role within the supply chain.
According to the United States Fashion Industry Association (USFIA), more than 80% of U.S. fashion companies plan to continue diversifying their sourcing geographically, while 72% expect to increase sourcing from suppliers benefiting from Free Trade Agreements (FTAs). However, only 44% intend to expand sourcing from the Western Hemisphere, and just 17% plan to increase “Made in USA” sourcing. This suggests that the current supply chain shift is primarily a reallocation within the global production network, rather than a large-scale return to domestic manufacturing.
The share of sourcing from China among U.S. companies has continued to decline: 60% of businesses now source less than 10% of their garment products from China, compared with 40% in 2024, while around 70% no longer consider China their largest sourcing destination. Over the next two years, more than 80% of companies are expected to further reduce sourcing from China. Nevertheless, China continues to hold a critical position thanks to its comprehensive manufacturing ecosystem, strong capability in handling complex orders, flexibility, and speed to market. China’s role is gradually shifting from that of a low-cost manufacturing hub to a more integrated, higher value-added production center.
Other Asian countries are emerging as complementary nodes within the global supply network. Bangladesh continues to maintain advantages in cost competitiveness and scale for basic garment products; India benefits from strengths in raw materials, labor availability, and its large domestic market; while Cambodia and Indonesia compete effectively in the mid-cost manufacturing segment.
Within this trend, Vietnam has become an important destination in supply chain diversification strategies, thanks to its strong reputation for political and trade stability, strong order-fulfillment capability, and deep integration through FTAs. More importantly, Vietnam’s production capacity is evolving toward greater flexibility, aligning with international brands’ increasing demands for diversified orders, faster delivery times, and higher compliance standards.
Redefining “Efficiency” in Textile and Garment Supply Chains
Today, “efficiency” can no longer be understood simply as achieving the lowest possible cost. If enterprises focus only on direct production costs, they may choose the cheapest option available. However, once logistics expenses, inventory costs, delivery delays, compliance risks, exchange-rate fluctuations, order adjustments, and opportunity costs are fully taken into account, the cheapest option might not be the most efficient one.
As a result, efficiency must now be understood in terms of “system efficiency” — the ability to generate the best overall outcome across the entire supply chain, rather than optimizing individual stages in isolation. A factory with low processing costs but unstable delivery performance may increase total supply chain costs; a low-cost raw material source lacking traceability may raise the risk of losing orders; and a cheaper transportation route with long and unpredictable transit times may increase inventory levels and reduce responsiveness.
Supply chain efficiency in the textile and garment industry under the new environment can be viewed through five key dimensions:
- Direct cost efficiency, including raw material prices, labor costs, productivity material consumption standards, manufacturing costs, and management expenses. This remains a critical foundation, particularly in an industry characterized by narrow profit margins. However, cost efficiency today is no longer achieved simply through lowering wages or squeezing suppliers, but through controlling waste, reducing defects, optimizing material usage, improving labor productivity, enhancing equipment utilization, and eliminating non-value-added costs.
- Working capital efficiency, reflected in inventory turnover, receivables collection time, payment cycles, and the amount of capital tied up in raw materials, work-in-progress, and finished goods. In an environment of volatile interest rates and exchange rates, working capital efficiency is just as important as production efficiency. A company may maintain strong profit margins, but if it carries excessive inventory, collects payments slowly, purchases raw materials at the wrong time, or experiences extended order cycles, its overall financial efficiency may still remain low.
- Time efficiency, meaning the ability to shorten lead times, respond quickly to customer changes, and reduce delays in decision-making. Faster delivery can help reduce inventory, improve in-season sell-through rates, and minimize markdowns. In a market where buyers are becoming more cautious with order placement, suppliers with faster response capabilities will gain advantages over those competing solely at low prices.
- Risk management efficiency, referring to the ability to maintain operations amid disruptions related to logistics, trade policy, raw materials, energy, or order fluctuations. This aspect was often overlooked under traditional cost-optimization models, but it is becoming increasingly important in today’s “new normal” of uncertainty. Effective risk management is reflected not only in reducing dependence on a single customer, market, or supply source, but also in the ability to respond to and recover from disruptions when they occur.
- Compliance and data efficiency. Supply chain systems capable of providing traceability data and transparency are increasingly becoming a competitive requirement. The better a company controls its data, the greater its ability to demonstrate capability to customers and reduce costs associated with inspections and compliance checks. More importantly, strong data infrastructure is essential for risk management and end-to-end supply chain optimization, enabling faster and more accurate operational decision-making.
Thus, enterprises achieve efficiency not by cutting costs at every point, but by optimizing the system as a whole. Certain costs should indeed be reduced, such as waste, quality defects, slow-moving inventory, idle time, and planning inaccuracies. However, other expenditures should be viewed as long-term investments — including data systems, traceability capabilities, strategic inventory buffers, supplier development, and supply chain management talent development.
In other words, efficiency in the new environment is resilience-driven efficiency: controlling costs without sacrificing the flexibility and security of the overall system.
Managerial Implications
First, enterprises need to shift from an “order-based” mindset to a “customer–product–supply chain system” mindset. Not every high-revenue order is necessarily efficient if it requires complex materials, long lead times, high payment risks, or disrupts production capacity. Conversely, an order with more modest revenue but stable demand, alignment with production capabilities, and fast turnover may generate greater overall efficiency.
Second, enterprises need to develop the capability to analyze total cost structures. Decisions related to order acceptance, raw material purchasing, transport route selection, or supplier selection should be based on total cost and total risk considerations, rather than solely on unit price. This is the key to avoiding situations where individual stages appear profitable, while the overall supply chain remains inefficient.
Third, enterprises need to invest in supply chain data systems. As customers increasingly demand higher levels of traceability and transparency, data is no longer used solely for reporting purposes, but also as a foundation for decision-making. A strong data system enables enterprises to identify which orders are truly efficient, which customers generate the most value, which stages create delays, and which risks should be prioritized for resolution.
Fourth, relationships with suppliers and customers need to evolve from short-term transactional arrangements toward more selective and strategic partnerships. In an environment of uncertainty, a reliable partner network becomes an essential component of resilience. Enterprises cannot effectively manage all risks on their own without close coordination with raw material suppliers, logistics providers, and customers.
Finally, enterprises need to treat resilience capability as a measurable management metric rather than merely a slogan. It should be quantified through indicators such as on-time delivery rates, order fulfillment capability, response time, degree of supplier dependency, traceability coverage, and working capital efficiency.
